Microsoft to rein in spending growth

Microsoft plans to increase its operating expenses next year but it won't reach the $2.7bn increase inked in for 2007, CEO Steve Ballmer told financial analysts yesterday.

Ballmer said at a meeting with investors and financial analysts in New York: "I wouldn't expect a huge drop. Just a small drop is what you should have in mind."

He also cautioned that some analysts may be forecasting too much revenue growth in the Windows business associated with the launch of Vista. He noted that although Microsoft expects growth, more of it will come from consumers and in emerging markets - places where it gets less revenue.

Ballmer said at the event, which was also broadcast over the internet: "We're driving it hard but I think some people have gotten a little overexcited."

The company expects to see some gains by reducing piracy rates with Vista but Ballmer said the added revenue won't be that large when compared with the overall size of the Windows business.

Microsoft plans to give detailed guidance for its coming 2008 fiscal year at its April profits conference call. It reported quarterly profits in January that were ahead of what many analysts had predicted.

Ina Fried writes for CNET News.com